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Wednesday, February 10, 2016

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Cascade: No. 65, Spring/Summer 2007

Urban Developer Reflects on Community Development Financing

Struever Bros. Eccles & Rouse (SBER) is a Baltimore-based real estate development and construction company that specializes in urban mixed-use development (some combination of residential, retail, commercial, and office use). Much of SBER’s development also involves renovation of historic properties. In its 33-year history, SBER has completed or is developing projects that total more than 20 million square feet and $8 billion in total investment costs.

SBER has been active in Baltimore, Boston, Nashville, Providence and West Warwick, R.I., Durham, N.C., Yonkers, N.Y., Frederick, Md., Washington, D.C., Wilmington, Del., and Harrisburg, Pa.

C. William Struever, partner, CEO and president of SBER, was a founder of SBER and led its transition from a small construction firm to a $180 million business with 350 employees.1

Keith Rolland interviewed Struever at SBER’s offices in Baltimore.

What’s your outlook on the future of cities?

It’s a very hopeful time for cities because in recent years the marketplace has validated that they have a future. Substantial market segments of people really love what cities are all about and enjoy living, investing, working, and having fun in cities. The essentially urban dynamic of density and diversity creates more value in mixed-use projects. People will pay more to live in a condo or for rent because they like having great restaurants, cafés, and grocery stores in their building or neighborhood. Businesses find it’s easier to attract and retain talent.

One of the great opportunities in the urban economy is putting relics of our industrial past to new use. Here in Tide Point, there are over 1,400 people in office jobs.2

SBER converted a former Procter and Gamble soap factory, circa 1929, on a 15-acre site to a 400,000 square foot corporate office campus in a $63 million redevelopment on the south Baltimore waterfront.

What is SBER’s approach as an urban development firm?

We approach development in a comprehensive way from a collaborative perspective that is sensitive to our partners, end-users, and most importantly the community around us. Proper development not only changes environments; it also changes attitudes, beliefs, and people’s lives.

We typically take a prominent role in school partnerships, team up with effective workforce development programs, and try to include affordable housing in our housing plans.3

Please share insights from SBER’s work in mixed-use development.

The nature of urban downtowns is all about mixed use and diversity of product and customer. For us, no two projects are alike because we’re trying to integrate into the authentic character and fabric of each city and neighborhood, creating an exciting mix of people, uses, and activity.

We’re doing old buildings, and sometimes new buildings, or a combination of both. We often mix uses in a single building with retail, offices, and housing. Our interest is multiproject mixed-use investments in a lively neighborhood environment. We might have a separate office building deal and a residential building deal, but the buildings are right next to each other. We’re seeing a much greater flexibility in zoning and planning to encourage the mixing of uses.

The combination of daytime office workers with nighttime and weekend residents creates the critical mass essential to support a rich array of amenities, such as coffee shops and grocery stores, which make downtown a nicer and safer place to live, resulting in a more vibrant central business district.

What has SBER learned about adaptive reuse?

Older buildings are competitive in the marketplace, but in many cases they’re more expensive to rehab than to build new. We make deals work through public incentives such as historic tax credits, new markets tax credits, the Maryland enterprise zone property tax credit, and tax increment financing, which enables many local governments to invest in parks, streets, and transit, and create structured parking.

Historic buildings are adaptable for some uses, but not for others. If you have a building with a 120-foot-wide floorplate, it might make great office space, but it’s probably not good for residential conversion. We redeveloped the historic National Brewery in Baltimore, a glorious building with magnificent views of the city with federal historic tax credits; unfortunately, part of the building had no windows, so we reused it as a self-storage facility.

What has your experience been in obtaining financing from financial institutions?

It’s much easier today, compared to 10 to 20 years ago, to get mainstream equity and debt in urban properties. We’re often working with the community development departments of banks such as the Bank of America, Sovereign, Wachovia, and Citibank.

We often are in “edge” neighborhoods where we’re recreating an economy and there are no comparables and visible market demand, making it hard for the mainstream commercial real estate people to underwrite our deals.

While we see lots of interest and have great relationships with a number of the major banks in our market areas, I think that pricing still is prejudiced against community development. We pay on a net basis (once you net in the public incentives) more for community development than when we deal with the regular real estate people. Loan spreads and interest rates are much more competitive on mainstream loans. We have construction loans through the community development departments where we’re paying 270-basis-point spreads; at the same time, the market for construction loans has 150-basis-point spreads.

We need to dispel the notion that community development is higher risk and work on the competitiveness of pricing while improving the efficiencies of deal closings. It will encourage more investment in distressed urban areas and provide an opportunity to give better product if we’re getting higher loan to value and lower interest rate terms. Well-planned, well-executed mixed-use redevelopment has turned out to be remarkably resilient in the market.

How can public and private leaders help reinvent cities?

Jim Rouse had a favorite saying: what ought to be can be, if you have the will to make it so. Cities have for so long been losing population, jobs, tax base, and wealth that city leaders have gotten into a scarcity mentality that is crippling. The future prosperity of cities is all about confidence, spirit, and bold leadership. We must have mayors, presidents of universities and other institutions, and business and community leaders realize their specific interests can be integrated into a grander, widely embracing vision for the community.

SBER developed the first stage of Ships Tavern Mews in Wilmington. How do you see the outlook for Wilmington?

We remain very excited about Wilmington’s potential. When we first visited the city, it desperately needed a broader vision. Our mistake is that we didn’t have site control on more than one block. We weren’t able to assemble site control at prices that would work so we could deliver the intensity, quality, and diversity of uses that create a neighborhood. We were all by ourselves. Things that were promised didn’t happen around us. Today, we won’t go into a city unless all the ingredients are there.

In retrospect, the block we worked on was an example of totally impractical adaptive reuse. The 22 historic buildings presented incredible inefficiencies and complexities; the buildings were on different levels and in terrible condition. The block probably needed to be torn down.

SBER has developed 620 homes, primarily new construction and some renovations, in Harrisburg since 2001. How do you see the outlook for Harrisburg?

Harrisburg has a great mayor with lots of energy. There are encouraging signs of life, including new restaurants. The state alone has over 60,000 workers in Harrisburg. We fixed up blighted housing and established a housing market, but our investment was all residential and too incremental in scale. Our piece has been too small and too isolated to really have the full impact. Redevelopment there has to be much more aggressive. There’s a much bigger opportunity to scale up to do mixed-use.

For information, contact Bob Rubenkonig, vice president and director of marketing and communications at SBER, at (443) 573-4000 or;

  • 1 The late James W. Rouse, previously CEO of The Rouse Company and co-founder with his wife, Patricia, of the Enterprise Foundation (now known as Enterprise), was a member of SBER’s advisory board. SBER has historically had a close relationship with Enterprise.
  • 2 SBER developed Tide Point after it bought a vacant Procter and Gamble factory on Baltimore’s waterfront in 1998 and invested $80 million in an office campus. In two subsequent developments in the area, SBER converted a vacant Coca Cola plant into the world headquarters for Phillips Seaford and converted a vacant lead paint factory into a health club and retail and office space.
  • 3 In its school partnerships in Rhode Island, SBER is making cash contributions and in-kind donations of materials, equipment, technical expertise, and volunteer hours.

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Federal Reserve Bank of Philadelphia
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